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Technology Stocks : 3DFX -- Ignore unavailable to you. Want to Upgrade?

To: Pierre-X who wrote (4390)	6/19/1998 10:07:00 AM
From: fiberman	Respond to of 16960

sunsite.unc.edu

To: Pierre-X who wrote (4390)	6/19/1998 10:08:00 AM
From: Kevin M. Reilly	Read Replies (2) \| Respond to of 16960

Pierre - Could you reread post #4381 that I posted earlier and give me your impression? I think this indicates the tough environment TDFX is working under. It looks to me as if Diamond's 2D/3D business is going to NVIDIA. Kevin Reilly

To: Pierre-X who wrote (4390)	6/19/1998 10:32:00 AM
From: Andrew Fenic	Read Replies (2) \| Respond to of 16960

I'm not going to breath any big sigh of relief until I see TDFX establish itself back into the $18 to $22 range. Honestly, though, I think this stock would still be undervalued even if it doubled in price. TDFX should have a forward PE of at least 20 based on its growth rate. I think the market has made a fundamental mistake by lumping 3DFX in with commodity semiconductor companies. The VooDoo line are speciality chips that carry extremely high profit margins. Only when models become obsolete, as with Intel and its chips, do prices come down to commodity levels. 3D is also fundamentally different from 2D in that games will keep pushing the envelope whereas 2D business applications do not. The 2D accelerator I had 3 years ago, for example, could make short work of today's PowerPoint or Excel. The 3D accelerators of 1 year ago, however, struggle mightily on new games like Unreal. The one characteristic all commodity marketplaces have is that nobody is innovating or pushing the envelope. VHS VCR's, for example, haven't changed fundamentally in ages. Similarly, IoMega's ZIP drive is still a perfectly adequate floppy disk replacement. Margins on those products are being squeezed because consumers perceive no compelling reason to keep prices high. Also, competitors have plenty of time to replicate the technology since it isn't changing. The PC 3D market is quite the opposite. It is experiencing explosive innovation and dramatic growth. It may be the better part of a decade, if ever, before we see a commoditization of the market and the "low cost producer" as winner. Intellectual property and brand name recognition are much more important than cut-throat pricing in that market. This bodes extremely well for TDFX.